Is Perception Reality?

Before I continue the discussion on understanding investment risk, I feel compelled to intervene with thoughts regarding last week’s responses to the Jackson Speaks section of this publication. The question proposed, “Do you think the public is being gouged at the gas pump,” resulted in a unanimous yes from local residents. Before I begin to comment, please consider that, if you are a reasonable person, you will review the facts before surmising your conclusions.

With that said, I must say that I am surprised. I’m surprised that no one seems to understand the reality of economics and how it impacts them. Most everyone seems to believe that gas prices are high. Is that perception based in fact?

The answer is no. That’s right, I said, “no.” I realize the media, your friends, political leaders, and everyone else is telling you otherwise, but the fact is that relative to inflation and the value of the dollar, gas prices are not out of line. The fact is gas prices throughout history have fluctuated mostly between $1.50 and $3.00 per gallon in relation to the value of the dollar. Look at the chart below and tell me how you can believe that gas prices are higher than the historic range.

Gas Prices Relative to the Dollar

Now assuming you look at the chart and say, “But it’s at the high end of the range.” I would agree, it is at the higher end, however, we have no one to blame, but ourselves for that. More fuel-efficient vehicles are available, but most people, don’t want them. Can you say, “SUV?” This is part of the problem. There’s been a tax credit of up to $4,000 for the purchase of an electric vehicle until this year. Did you buy one? Me either! We’re to blame. For only $4.00 per block of power, you can switch your home electric over to all renewable power sources like solar, water, and wind at Have you switched yet? Me either! We’re to blame. Most everyone seems to want to blame someone else for the “problem,” if there is one. Let’s blame the oil companies, Bush, the war, whomever, anyone, but ourselves. The fact is that oil company profits as a percentage of the fuel being supplied are no higher than they have ever been. They are simply providing more fuel. And remember, taking profits from these giants is really taking profits from families like yours and mine. Do you invest for retirement? Think any of that is invested in an oil company? Do you think any American’s, working hard to feed their family like you, might work at one of these companies? Having lived in Houston a while, I can tell you, 99% of the people working in refineries are average American’s, just like you.

So, if you really think there’s a problem, I ask you, “When are you going to start doing something about it?”

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